ON Thursday evening, as the sun was getting low over the foothills of the Blue Mountains in NSW, Tony Ryan was holding court with about a dozen boys around a camp fire.

Ryan, an actor, was teaching the Aboriginal boys how to make and play didgeridoos at the Riverstone Aboriginal Family Service centre in Sydney's northwestern suburban fringe.

One of the boys was Heath Gibbs, 8, whose father, Gavin, was watching on. "These programs are what the parents want," says Gavin Gibbs, who works as a labourer and at the local RSL. "They also talk men's business and a bit respect and stuff for their culture. Tony has taken them to great heights."

The local Aboriginal community of about 350 is concerned about self-sufficiency, self-respect and keeping young people out of trouble. There isn't a big crime problem in Riverstone, Gibbs says, but "I think there's a potential for it".

While the RAFS gets $120,000 a year from the NSW Department of Community Services for a range of programs, that money has to cover basic running costs and one full time and two part- time positions.

Many of the activities conducted by the family service and the community's parent organisation, the Riverstone Aboriginal Community Association, involve volunteers or contributions from community members. The activities include homework groups, outreach days, health programs and a literacy program.

So, last year, when an arm of the Christian revivalist Hillsong Church went to RACA to be a partner in an application for nearly $500,000 of federal funds for a crime prevention program, it sounded great.

"We jumped when we thought we could get some money through Hillsong," RACA public officer Vilma Ryan says.

What RACA ended up getting was not money but a huge row with Hillsong which, according to allegations aired in the NSW parliament, deceived RACA, then, when Hillsong was found out, tried to buy its silence with an offer to pay it $280,000. The allegations were raised by NSW Labor MP Ian West in a speech in parliament.

West said Hillsong Emerge, which Hillsong calls its "public benevolent arm", had jointly applied with RACA for a $498,620 grant under a program called the National Community Crime Prevention Program, administered by Attorney-General Philip Ruddock's department.

That bid failed, West said. But Hillsong Emerge put together a second bid for $414,479 - without, he said, RACA's knowledge - which was successful. The plot, West told parliament, was designed by Hillsong Emerge chief executive Leigh Coleman.

"Hillsong Emerge has misused the Riverstone Aboriginal community to get taxpayers' money for its own purposes," he told parliament.

"The problem for Mr Coleman is that the application that Hillsong Emerge has called its own plagiarises proposals put forward to it by local community groups that were made in good faith as part of a joint application.

"On top of that, Hillsong's application then misrepresents the real situation in the community, stating the local area is being over-run by Aboriginal gangs. This is simply a lie, calculated to deliver Hillsong Emerge a bucket of federal taxpayers' money, and it has worked."

West's allegations are only the starting point for what is developing into an expanding political controversy. The successful Hillsong Emerge application lists some groups and individuals including RACA, the Blacktown City Council, federal Labor MP Roger Price and NSW Labor MP John Aquilina as stakeholders. The four say this is untrue.

Price found out he was supposed to be a stakeholder only when he was woken in Israel yesterday by a staff member who was informed of Price's listing on the application.

"He was never asked to be a stakeholder, he was never asked to provide a letter of support," Price's spokesman says. "I don't think he's overly happy."

The other dimension is the involvement of federal Liberal MP Louise Markus, who lives in Riverstone and seized the seat of Greenway at the last election from Labor by a slim margin. Markus used to work with Coleman at Hillsong Emerge and she remains an active member of Hillsong Church, which has a large congregation in the electorate. A spokeswoman for Markus confirms that Hillsong church members had helped her during the campaign, knocking on doors and distributing leaflets. Markus is listed in Hillsong Emerge's application as having sent a letter of support.

Blacktown Council mayor Leo Kelly says there are many people in the area who believe that Hillsong Emerge got the grant in some way as a result of Hillsong Church members' political support. "It's been vigorously denied, but I don't think it's washing too well," Kelly says. Markus declined to comment specifically on this to Inquirer.

Kelly says the council never did anything that could possibly lead Hillsong Emerge to claim it was a stakeholder. In fact, Kelly says, his council had put in its own application for funding under the same program. "I don't think it ever got considered," he says.

A number of complainants, including West, say the grant would not really have funded new projects but Hillsong Emerge's existing programs. In Hillsong Emerge's budget for the successful grant, $103,584 would go to the project co-ordinator's salary, $20,715 to the project co-ordinator's "on-costs", $46,800 to "contract management, supervision and support", $31,200 to "administration, reception, book-keeping", $8000 to "evaluation", and $7800 to "IT-communications". That accounts for more than half the grant, and the largest single allocation for actual activities is for "sporting-recreational events" at $18,000.

The budget also lists co-funding, including $28,800 from the Riverstone Aboriginal community. Not only does RACA say it never made such a commitment, it says the concept is absurd. "We were to have contributed at least $200 per week and we have no money," RACA's deputy chairman Chris McBride says.

The crime prevention program is managed by Justice Minister Chris Ellison. He would not answer specific questions, but a spokesman said: "The minister is advised that the grants under the scheme were properly assessed and that all NCCPP grant funding was allocated in accordance with the guidelines."

Hillsong Emerge has been rather successful in obtaining federal and state funds recently. Including the crime prevention grant, it has received $2.5 million. That also includes a $1.2million grant allocated from the federal Department of Employment for "micro-enterprise" developments.

"I feel there should be an investigation into the $2.5 million of mostly federal funds that are going into Hillsong Emerge's coffers," West says. "Taxpayers would demand an open and transparent audit trail for how all this funding was derived, and all and any Hillsong activities that are supported by taxpayers' money."

Kelly says Blacktown Council may refer the matter to the federal auditor-general.

RACA says it found out about the existence of the second application only when it was rung up by the Attorney-General's department saying the grant had been successful. RACA officers say when they confronted Coleman, he said the application involving RACA had failed, referring to the first one. They say Coleman resisted giving them a copy of the second, successful application, in which RACA is reduced from a partner to a stakeholder.

Markus would not answer specific questions related to this and other allegations. But in a statement, she says: "Applications for the NCCPP were assessed independently and due process was followed at all times ... I support all community groups that apply for funding through this program or any other."

Eventually, Coleman and two lieutenants came to the RACA offices where, Ryan says, he apologised and asked what could be done.

Ryan says during a break in the discussions, the RACA leaders decided to catch out Coleman.

"When they came back we said: 'What about if, hypothetically, you pay us $280,000?"'

Coleman wrote a letter on the spot saying Hillsong Emerge would support RACA getting $280,000 and that it should be the lead agency in the administration. To RACA, that was a bid to stop the community breaking the story to the media; RACA will not take any money from Hillsong Emerge.

A spokeswoman for Hillsong Emerge, Maria Ieroianni, at first said she could not answer most of the specific questions on a list put by Inquirer because Coleman was in East Timor and uncontactable. Coleman came back to Sydney this week, but Ieroianni subsequently said he would not speak with Inquirer or be in a photograph. She said Hillsong Emerge would not answer outstanding questions or any new ones, arrange for a visit to a Hillsong Emerge micro-enterprise project or co-operate in any way. Before the ban was imposed, Ieroianni said Coleman's letter supporting RACA getting $280,000 was not an attempt to silence RACA but amicably resolve the issue.

An important element in the controversy is Hillsong Emerge's claims it is separate from Hillsong Church. One of the many questions Ieroianni would not answer was whether the list of six proposed management committee members in the successful application were members of Hillsong Church.

But a worker at Hillsong Emerge's Blacktown office, Mara Mackey, says "all staff members have to be involved in the church".